GAO: More Retirees Could Have to Buy Private Health
Coverage

June 1, 2001 (PLANSPONSOR.com) - The General
Accounting Office (GAO) foresees a further decline in
employer-sponsored retiree health care, forcing an increasing
number of retirees to seek more expensive or unaffordable
private insurance.

Retirees will face numerous hurdles in obtaining private
health insurance, the GAO wrote in a study called
“Employer-Sponsored Benefits May Be Vulnerable to Further
Erosion.”

The GAO reported that the number of retirees with
employer-sponsored health coverage has remained relatively
stable since 1997, as employers have focused on reducing
coverage for future rather than current employees.

Researchers listed several factors that could prompt
a further erosion from the current 37% of early
retirees and 26% of Medicare-eligible retirees with health
coverage from a former employer.

These are:

a resumption of premiums outpacing
inflation

an economic slowdown with a softening labor
market

changes in Medicare coverage (such as adding a
prescription drug benefit) that could affect cost and
design of employer coverage for Medicare-eligible
workers

a recent court ruling, allowing claims of violations
of federal age discrimination law when employers make
distinctions in health benefits they offer retirees on
the basis of Medicare eligibility

The GAO said the decline in the amount of
employer-provided coverage has not reversed itself since
1997.

Forcing retirees to find their own coverage puts them in
the private insurance market at the worst possible time –
when the workers are older and have potentially chronic
illnesses. ‘Retirees whose former employers reduce or
eliminate health benefits often face limited or
unaffordable alternatives to obtaining coverage,’ the GAO
writes.

For example, a 60-year-old male in a state where the
cost of private health premiums is not capped, could pay
four times what a 30-year-old male pays and more if the
older worker is sick, the GAO said. Most states do not cap
individual premiums.